WASHINGTON CONFLICTED OVER ONLINE GAMBLING BAN.

When the United States government in the 1920s tried to prevent the nation consuming alcohol on moral grounds, it was a spectacular failure. Illicit speakeasy' bars gained legendary popularity and the number of bootleggers' - illicit traders in alcohol - soared as did organised crime and the mafia. The amendment to the US Constitution prohibiting alcohol was consequently repealed in 1933. Eight decades on, lawmakers are wondering if the US' 2006 prohibition on internet gambling should be repealed too as it has only driven the market underground and is proving tough to enforce. Legislation is under consideration in the US Congress to replace the ban with a licensing system. Such a move would be welcome in Europe, where online gaming companies like PartyGaming and SportingBet were doing a roaring trade across the Atlantic before being forced to exit the market.

WTO COMMITMENTS

Meanwhile, the European Commission is trying to get the US to comply with a commitment it made in 1997 to the World Trade Organisation (WTO) to open its gambling market to foreign operators. The US government, in December 2007, granted the EU new market access in various sectors, including postal services and warehousing, in compensation for not meeting its WTO commitment, from which it has still not formally withdrawn. The US did similar deals with Canada and Japan. Protracted negotiations with Antigua, the country that in 1997 won a WTO case against the US that precipitated the compensation claims, are continuing.

In addition, the Commission is pursuing another potential WTO case arising from how the US Department of Justice (DoJ) targets European gaming operators for prosecution. The Commission, in a June 2009 report, concluded that the DoJ's actions violated the US' WTO commitments. It is currently negotiating with the DoJ, trying to find an amicable solution that would avoid a legal battle at the WTO. The US Trade Representative, given its vulnerability because of the US' WTO commitment, is more flexible on this issue than the DoJ. US justice officials insist prosecutions are justified because online gambling was illegal in the US even prior to the 2006 ban.

Though the DoJ says the ban is justified on moral grounds, it is equally clear there are big bucks at stake. By playing hardball, the DoJ has managed to extract massive financial settlements from European firms. In December 2008, for example, the Gibraltar-based PartyGaming agreed to pay a US prosecutor US$300...

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